Commentary on Economics, Information and Human Action

Does EPSA support capacity markets? For power markets, yes; for gas pipeline markets…

The Electric Power Supply Association, “the national trade association representing competitive power suppliers,” supports the use of electric power capacity markets to ensure sufficient generation capacity is available to reliably serve peak consumer load. See, for example, EPSA’s policy paper on the topic:

Well-functioning forward capacity markets are a critical component of organized wholesale competitive electricity markets in many parts of the country. These markets provide the capacity needed for the continued reliable operation of the grid through the commitment of existing supply, investment in new generation when needed and participation by consumers to manage their demand (demand response).

So you might expect that when the issue is securing sufficient natural gas pipeline capacity to ensure continued reliable operation of gas delivery at peak times, EPSA would favor a capacity market-style solution.

Generally, across the board, the electricity market is not stepping up … to contract for the reliability that they seek from the gas-fired generators,” said Richard Kruse, vice president of regulatory affairs for Spectra Energy Corp., which operates 19,000 miles of natural gas pipelines….

“We hear all the time from gas-fired generation in New England, ‘We cannot afford pipeline capacity if we don’t get paid to hold that capacity,'” Kruse told reporters at a press briefing Friday sponsored by the Interstate Natural Gas Association of America (INGAA).

“When people step up and say they want to sign up for contracts, that’s when we’ll start working on the infrastructure that they need,” Kruse said.

EPSA’s John Shelk offers the power generators viewpoint, stating they don’t need firm capacity rights on gas pipelines all of the time, just those times the power plant will be dispatched in the power market. He adds that a power generator that pays for firm capacity it can’t use will not be competitive in the power market.

I can see his point, which mirrors in a way, how many power consumers feel about electric power capacity markets. Power consumers don’t want to pay for a lot of extra generation all of the time since they only actually need those extra bits of generating capacity for, typically, just a few hours out of a year.

4 thoughts on “Does EPSA support capacity markets? For power markets, yes; for gas pipeline markets…”

Is “periodic firm capacity” anything like variable-fixed? Demanding “periodic firm capacity” is like demanding low priced health insurance with a pre-existing condition, only when you are sick.

The electric generators have demanded interruptible rates for firm capacity for decades. Unfortunately, “part-time pipe” is a pipe dream. 🙂 They have little concern that firm customers might be curtailed or interrupted when the generators decided to operate.

…and the generators don’t want to pay that cost either. Summer generator operation is not as big an issue as winter generator operation, which is on-peak for the pipelines. However, the pipelines must refill storage over the summer, to meet winter peak demand.